Credit
Risk Regulation: Do UK Banks Comply With Basel II? (2008)
Credit
risk is an inherent part of the banking business. There are different
classifications of the credit risk. However, the two major sources of
its exposures in the financial institutions are the
borrower’s default and the downgrade in the
counterparty’s credit rating. Starting from the year 2008
internationally active European banks are obliged to manage their
credit risks in accordance with Basel II. Basel II allows the banks to
implement one of the three approaches to calculate their credit risk
exposures and, hence, determine the amount of the regulatory capital
they are required to hold. In the United Kingdom the Financial Services
Authority regulates banks to comply with the Basel
Committee’s standards and imposes additional capital
requirements on them depending on the quality of their loans and risk
management systems. This study investigates whether UK banks comply
with Basel II by analysing a sample of the country’s Top 5
banks. The research determines that despite the existence of various
incentives for the regulation violations and significant challenges in
the implementation of the new standards, the examined banks comply with
the Basel II capital adequacy requirements and, moreover, their capital
reserves are significantly higher than those established by the Second
Accord. Finally, the examination of the relationship between the
capital requirements and the level of commercial and industrial lending
in the banks with the certain assumptions allows to state that the
increase in the capital charges motivates the banks to enhance their
higher risk investments even when the overall portfolio of assets
doesn’t grow significantly. Moreover, with regard to three
banks under consideration, a sharp increase in the amount of regulatory
capital leading to additional ordinary share issues has been uncovered.
- 10,000 words –
75 pages in length
- Excellent use of
literature
- Good in depth analysis
- Excellent use of
statistics
- Well written throughout
- Ideal for finance and
business students
Chapter 1: Introduction
Motivation for
the Research
The Research
Objectives
Chapter Outline
Chapter 2: Literature
Review
Credit Risk:
Definition and Sources
The Bank for
International Settlements’ Regulation of Credit Risk
Management
Challenges of the
Basel Ii Implementation
The Financial
Services Authority Regulation of the Credit Risk Capital Adequacy
Requirements
Banks’
Incentives for the Violation of the Capital Adequacy Requirements
Chapter 3: Methods
and
Methodology
Research
Philosophy and Approach
Methodology
Type of Analysis
Type of Data
Ethics
Hypothesis and
Research Question
Hypothesis
Question
Research Method
Methods of
Analysis
Method Quality
Secondary Data
Collection Method
Sample
Limitations
Chapter 4: Findings
and
Analysis
Sample
Capital Ratio
Analysis
The Influence of
Regulatory Capital on the Banks’ Levels of Commercial and
Industrial Lending
Capital
Requirements and Shareholders’ Equity
Chapter 5: Conclusion
Implications of
the Research
Limitations
Areas for Future
Research
Reference List
Bibliography
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from the dropdown list
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